PROJECT SUMMARY One of the provisions of the Affordable Care Act was to establish Accountable Care Organizations (ACOs) in the Medicare program. ACOs assume financial responsibility for large populations of patients. ACOs become eligible to receive bonuses by meeting specific quality and savings benchmarks. Over 23 million Americans are now covered by more than 740 ACOs. The early experience with ACOs suggests a ?triple win??lower costs, higher quality, and better patient experience?and the ACO model continues to grow rapidly. Over 51 million inpatient surgical procedures are performed annually in the United States at a cost of over $500 billion, accounting for 40% of all hospital and physician spending. Despite this, ACOs leaders have largely ignored surgical care. With this research, we aim to better understand surgical cost variation within ACOs. For example, a common ACO strategy (dubbed ?hot-spotting?) is to try to reduce costs for the most expensive medical patients. However, we do not know whether ?hot-spotting? is a viable strategy for reducing surgical costs. Second, while we know that surgical costs can vary significantly between hospitals,we do not know whether ACOs could save money by referring patients from high-cost to low-cost hospital for their surgical procedures. Finally, there is not yet any evidence that ACOs can reduce surgical costs. If certain ACOs do succeed in reducing surgical costs, it would be useful to know whether they use ?hot-spotting? and selective referral to do so. We will address all of these questions through a series of studies using payment data for Medicare patients in ACOs who are undergoing 18 surgical procedures over the years 2012-2016. This research is the first step towards identifying strategies that ACOs can use to reduce surgical costs and will enable future work aimed at implementing such strategies. Furthermore, the research project, highly experienced multidisciplinary mentorship team, and unparalleled research environment are ideally suited to address the career goals and educational needs of the candidate, Hari Nathan, MD, PhD. The proposal includes a detailed educational plan with training that will be essential both for successful completion of this research and toward Dr. Nathan's career development. The training includes graduate level courses in econometrics and policy analysis. This career development award will lay the groundwork for Dr. Nathan to perform ongoing, innovative health services research, and to become an independent investigator and national leader in understanding and improving surgical cost variation.